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The Economic Impacts of the Tobacco Settlement

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  • David M. Cutler
  • Jonathan Gruber
  • Raymond S. Hartman
  • M.B. Landrum, J. Newhouse
  • Meredith B. Rosenthal

Abstract

Recent litigation against major tobacco companies culminated in a Master Settlement Agreement' (MSA) under which the participating companies agreed to compensate most states for Medicaid expenses. We outline the terms of the settlement and analyze whether it was a move toward economic efficiency using data from Massachusetts. Medicaid spending will fall, but only a modest amount ($0.1 billion). The efficiency issue turns mainly on the treatment of health benefits from reduced smoking induced by the settlement. We conclude that the settlement was a move towards economic efficiency.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7760.

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Date of creation: Jun 2000
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Handle: RePEc:nbr:nberwo:7760

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Cited by:
  1. Jonathan Gruber, 2001. "Tobacco at the Crossroads: The Past and Future of Smoking Regulation in the United States," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 193-212, Spring.
  2. D. Cutler & R.G. Frank & C. King III & M.B. Rosenthal & E.R. Vigdor & A.M. Epstein & R.S. Hartman & J.P. Newhouse, 2000. "How Good a Deal Was the Tobacco Settlement?: Assessing Payments to Massachusetts," NBER Working Papers 7747, National Bureau of Economic Research, Inc.
  3. Goel, Rajeev K. & Nelson, Michael A., 2007. "The Master Settlement Agreement and cigarette tax policy," Journal of Policy Modeling, Elsevier, vol. 29(3), pages 431-438.
  4. W. Kip Viscusi & Joni Hersch, 2010. "Tobacco Regulation through Litigation: The Master Settlement Agreement," NBER Chapters, in: Regulation vs. Litigation: Perspectives from Economics and Law, pages 71-101 National Bureau of Economic Research, Inc.
  5. David Cutler & Jonathan Gruber, 2001. "Health Policy in the Clinton Era: Once Bitten, Twice Shy," NBER Working Papers 8455, National Bureau of Economic Research, Inc.
  6. Cutler, David M. & Lleras-Muney, Adriana, 2010. "Understanding Differences in Health Behaviors by Education," Scholarly Articles 5344195, Harvard University Department of Economics.
  7. Henrik Hammar & Olof Johansson-Stenman, 2004. "The value of risk-free cigarettes - do smokers underestimate the risk?," Health Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 59-71.
  8. Sloan, Frank A. & Trogdon, Justin G. & Mathews, Carrie A., 2005. "Litigation and the value of tobacco companies," Journal of Health Economics, Elsevier, vol. 24(3), pages 427-447, May.
  9. Levy, Douglas E. & Meara, Ellen, 2006. "The effect of the 1998 Master Settlement Agreement on prenatal smoking," Journal of Health Economics, Elsevier, vol. 25(2), pages 276-294, March.
  10. Gabriel A. Picone & Frank Sloan & Justin G. Trogdon, 2004. "The effect of the tobacco settlement and smoking bans on alcohol consumption," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 1063-1080.
  11. Cutler, David M. & Lleras-Muney, Adriana, 2010. "Understanding differences in health behaviors by education," Journal of Health Economics, Elsevier, vol. 29(1), pages 1-28, January.
  12. Brachet, Tanguy, 2008. "Maternal Smoking, Misclassification, and Infant Health," MPRA Paper 21466, University Library of Munich, Germany.
  13. Jeffrey D. Kubik & John R. Moran, 2001. "Can Policy Changes Be Treated as Natural Experiments? Evidence from State Excise Taxes," Center for Policy Research Working Papers 39, Center for Policy Research, Maxwell School, Syracuse University.
  14. Jonathan Gruber, 2001. "Youth Smoking in the 1990's: Why Did It Rise and What Are the Long-Run Implications?," American Economic Review, American Economic Association, vol. 91(2), pages 85-90, May.
  15. Ciliberto Federico & Kuminoff Nicolai V, 2010. "Public Policy and Market Competition: How the Master Settlement Agreement Changed the Cigarette Industry," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-46, July.
  16. Jonathan Gruber, 2000. "Youth Smoking in the U.S.: Prices and Policies," NBER Working Papers 7506, National Bureau of Economic Research, Inc.
  17. MacDonald, James M. & Perry, Janet E. & Ahearn, Mary Clare & Banker, David E. & Chambers, William & Dimitri, Carolyn & Key, Nigel D. & Nelson, Kenneth E. & Southard, Leland W., 2004. "Contracts, Markets, and Prices: Organizing the Production and Use of Agricultural Commodities," Agricultural Economics Reports 34013, United States Department of Agriculture, Economic Research Service.
  18. Douglas E. Levy & Ellen Meara, 2005. "The Effect of the 1998 Master Settlement on Prenatal Smoking," NBER Working Papers 11176, National Bureau of Economic Research, Inc.
  19. Barnett, W.S. & Masse, Leonard N., 2007. "Comparative benefit-cost analysis of the Abecedarian program and its policy implications," Economics of Education Review, Elsevier, vol. 26(1), pages 113-125, February.

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